Customers were seeing 80% or 70% clothing ad discounts on June 9, 2025 at a supermarket in Hangzhou, Z Jiang Province, China.
cfoto | Future Publishing | Getty Images
Beijing – China’s consumer spending shows little signs to pick up immediately given uncertainty about future wealth, changing preferences and lack of a social safety net.
For the fourth consecutive month, consumer prices have fallen, with consumer confidence hovering near historic lows, and the real estate market is struggling to turn it around. Analysts repeatedly point to one major factor: stagnant income.
China’s disposable income has halved its pace of growth since the 2020 pandemic hit, and now grows by 5% per year, Standard Bank’s Asian economist Jeremy Stevens said in a report Wednesday.
Most jobs don’t have much raises. Of the 16 sectors, only three have outperformed wage growth since 2020, he said, including mining, utility and information technology services.
A monthly business survey in May showed contraction in the full labor market, particularly as factories navigate US tariffs. The unemployment rate among young people aged 16 to 24 remained high at 15.8% in April. The city’s official unemployment rate is hovering around 5%.
According to a quarterly survey by the People’s Bank of China, Chinese households said in the third quarter of 2024 that they would save money rather than save or invest in the third quarter of 2024.
According to the latest survey released in March, it eased to 61.4% in the fourth quarter, but reflects the trend of over 60% of respondents who prefer to preserve what has been recorded since the second half of 2023.
And for respondents who were planning to increase spending, education was the top category, followed by healthcare and tourism, according to a PBOC fourth quarter survey released in March.
More than half of respondents thought the job market was becoming more difficult or difficult to communicate.
People in China aim to save, especially as they have limited insurance coverage, meaning that individuals will have to pay most of the costs of hospital care, higher education and retirement. Real estate in the past few years is also weighted to spending, as it accounts for the wealth of most households in China.
Yuekai Securities Chief Economist Luo Zhiheng said in a memo, a way to be willing to spend people more willingly spending is by paying more than double the pension.
He added that increasing public holidays and providing consumption vouchers for the services sector will also be helpful.
Over the past few weeks, Chinese authorities have stepped up plans to further support employment and improve social welfare. However, policymakers shunned the massive cash handouts that the US and Hong Kong gave residents to stimulate post-pandemic spending.
Analysts coming out of the pandemic warned that retail sales in China would recover very slowly as key consumer uncertainties remained resolved.
Bruno Lannes, a Shanghai-based senior partner responsible for consumer products and retail operations at Bain & Company, said 10 years before the pandemic, “Chinese consumers were happy to purchase any innovation, and even innovations that were not innovation.”
“In today’s world, they’re more rational. They know what they want,” he said Thursday in a webinar.
China is scheduled to report retail sales in May on Monday. Analysts voted by Reuters predict a slowdown to 4.9% year-on-year growth, down from 5.1% in April.
Shift from a big city
Another factor in negative CPI readings is that Chinese consumers are looking at low-cost products, which can benefit from overproduction of relatively high-quality products or move from large cities to places with low cost of living.
Shanghai lost 72,000 permanent residents last year, while Beijing saw a decline of 26,000, WorldPanel and Bain & Company noted in a report on Thursday. The two cities are usually classified as “tier 1” cities in China.
As a result of the population shift, small cities categorized as “Tier 3” and “Tier 4” experienced much higher growth in the amount and value of daily necessities sold last year, offsetting the decline in Tier 1 cities, the report said. This study covered packaged food, beverages, personal care and home care.
Last year, the total volume of such products sold in China increased by 4.4%, but average selling prices fell by 3.4% as consumers increased their price by lower priced products and businesses increased their promotions.
This trend is even affecting the sale of flowers.
Kunming International Flora Auction Trading Centre in Yunnan, Asia’s largest flower market, said in May that more demand has arisen from more wealthy low-rise cities, with more volumes increasing and average selling prices being lower.
After a busy May holiday season, business has become quiet, Li Shenghuan, a flower cellar near the trading centre, said on Friday. She said the prices for flowers have dropped slightly. She hopes demand will recover on National Day public holidays in early October.
Official data show that per capita disposable income per rural per capita has been less than half that of a city for years. Disposable income per capita in urban areas last year was 54,188 yuan ($7,553). That’s far less than the reported US $64,474 as of December.
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Standard Bank’s Stevens noted that the ratio of consumption to income in rural areas has “a significant increase,” surpassing pre-pandemic levels, and the proportion of urban households has declined. However, he noted that low-income households do not have the size of the wealth that high-income groups make to significantly increase their consumption in the near future.
The top 20% account for half of China’s total revenue and consumption and 60% of total savings, he said. “Policy support for low-income groups, although well-intentioned, is insufficient without structural wage reform.”
Furthermore, China’s “common prosperity” rhetoric has introduced institutional reorganization and policy changes. It added to the uncertainty of goodwill, but the change said it “still found a completely new equilibrium,” which added uncertainty.”
